Today 's postwar baby boomers have perhaps been the most dramatically affected by Taiwan's economic growth. Most grew up poor but now live fairly well. According to a 1991 survey by the Directorate General of Budget, Accounting, and Statistics, they have the highest average monthly earnings of all age groups-NT$25,400 (US$980)-compared with the overall average of NT$22,000 (US$855).
What do they do with their money? In general, they save and invest differently from the cautious methods used by the older generations. They are often more willing to take financial risks. Popular choices are investments in real estate, stocks, government bonds, mutual funds, antiques, and even postage stamps. Below, seven fortysomethings talk about how they spend, save, and invest money.
Interest in the Taiwan Stock Exchange hit a fever pitch in the late 1980s. The rush has now slowed considerably, but many still play the markets.
Forty-two-year-old Joseph Chen (陳永豐) is a mid-ranking government employee. His 40-year old wife Liu Hsiao-hua (劉筱華) is a junior high school teacher. Their combined monthly income surpasses NT$90,000 (US$3,500). Chen gives more than half of his salary to his wife, a traditional arrangement among Chinese couples. He uses the rest to pay the monthly utilities and to make a NT$10,000 (US$350) donation to their church. What ever is left, he uses as pocket money for collecting stamps and buying books and laser discs. With her salary and part of Chen's, Li u has about NT$71,000 (US$2,700) to use for family expenses. This allows a more than adequate budget for the five-member household.
Chen considers it important to give their three children a monthly allowance, something he never had even as a teenager. Chen spent his childhood working for free on the family farm, growing bananas and raising shrimp. “We kids would steal money from our grandpa's change box,” he confesses. “We stole because we didn't even have money for candy.” Chen doesn't want his own children to have an excuse to steal, so he started giving them an allowance when they reached the age of six. They can earn extra pocket money by doing chores around the house.
Not just for fun Stamp collecting is part of Joseph Chen's investment plan, along with joining huei, and buying stocks.
Chen and Liu spend most of their earnings on their children's education. Their eldest daughter goes to a private high school and lives in a school dormitory. The younger daughter, a ninth grader, attends a cram school in the evenings to prepare for the tough high school entrance exam. Their son, in seventh grade, takes classes in computer and guitar. All three kids took piano classes in primary school, and they still take swimming classes and join in other outdoor activities every summer. “We try to provide them the best we can,” Chen says.
Despite generous spending on their children, Chen and Liu value frugality. Chen has his shirts and trousers made for about NT$1,500 (US$60) a piece. His wife buys her clothes at bargain prices at a night market or at small stores. And the children wear mostly hand-me-downs. The Chens seldom go out to eat, and their weekends are mainly spent at church activities. Traveling is limited to an occasional trip to southern Taiwan to visit grandparents. “My materialistic needs are very easily satisfied,” Chen says. “As long as I have a bowl of noodles for lunch, a nice stereo to listen to, and enough money to pay for a good education for the kids, I'm a happy man.”
Maintaining a simple lifestyle has begun to pay off. Three years ago, Chen and Liu were able to pay back the money they had borrowed from Chen's father to buy their home. Since then, they have joined three huei, private loan-investment groups that are extremely popular [see box]. In this way, they have accumulated NT$300,000 (US$ 12,000) “without even thinking about it,” as Chen puts it.
Moderate consumers- Fortysomethings are not as hungry for imported goods, such as these Japanese clothes, as the younger generations, but they are far more willing to spend than their parents were.
The couple has also invested in stock, mostly at the urging of Liu’s brother. They didn't want to refuse his goodwill, a common concern among Chinese, and so bought a few shares. But they haven't touched the stock since, having little interest in tracking the market. “We're not interested in making more money,” Liu says. “We feel blessed already that we've never been short of money; so we're not asking for more.”
Chen is not worried about retirement. As a government employee, he will have an adequate pension and inexpensive health care for both himself and his wife. Like many Chinese, he sees no need to buy any other insurance. If he encounters financial problems, he can always turn to his family. His parents loaned him the money to buy his apartment, and now Chen and four of his brothers are pitching in to buy an apartment for the youngest brother. As the oldest in the family, Chen himself helped pay college tuition for his brothers and one sister. “My extended family is my insurance,” he says. “I know I can count on my father and my brothers.”
Another Chen family, not related to the one above, lives in a small town near Hualien on the east coast. Their blue-collar income is somewhat smaller than the Taipei Chens. As a railway worker, 47 year-old Chen Chih-liang (陳志良) earns about NT$26,000 (US$1,000) a month. His wife, Peng Yu-lan (彭玉蘭), 45, pulls in NT$52,000 (US$2,000) a month by selling ling-chih (靈芝), a fungus used for medicinal purposes. The couple's two daughters, both high school graduates, also contribute part of their incomes to the family. Peng puts her daughters' money into two separate saving accounts. “I'll give it back to them when they get married,” she says, “so they can have some money to start their own families.”
Unlike the big-city Chens, the Hualien Chens have saved as much money as possible since they started their family twenty-eight years ago. When they were first married, they worked on the family farm. In the 1960s, when jobs began opening in manufacturing, construction, and transportation, Chen and Peng-like many farmers-ventured off the field. Chen found a job at the railway station helping to switch trains, and Peng went to work at a tennis racket factory. Supporting four children plus Chen's parents, the couple barely made ends meet. For extra income, Peng grew and sold vegetables, and Chen moonlighted at Peng's factory. In those days, they never ate out, not even at a cheap roadside food stand. The only new clothes their children had were their school uniforms. There was no extra money for allowances.
Their only goal was to save. “I came from a poor family and married a man whose family was just as poor,” Peng says. “We both know what-it's like to be penniless-so we're determined to get as rich as possible.” Whenever there was money left over, they used it to join a huei or to buy gold jewelry. Peng believes gold is an especially good investment, since their daughters can have it for their dowries when they marry. “It also preserves the value of your money better than a savings account,” she says.
The desire to pull themselves out of poverty has made them somewhat more adventurous than the white-collar Chens. Chen Chih-liang spent money playing ta chia-le, an illegal lottery that was widely popular in the mid-1980s. Today, he still plays liu-ho-tsai, a successor to ta-chia-le. He was also swept up by the stock market craze of the 1980s and was able to make good money. “I had to try my luck,” Chen confesses. “I'll never get rich just from my salary.” Peng, no less adventurous, decided to try selling ling-chih. She started it as a second job in 1987, and one year later she was a full-time direct-sales representative. She did so well that two years later, the company rewarded her with a car.
Today, Chen and Peng own a three story house, and they have gone abroad on vacation. They can also afford to send their youngest son to a private college. Nevertheless, their lifestyle has not changed much. The dream of prosperity has nearly come true, but the sense of financial insecurity lingers. Says Peng, “Saving makes me happier than spending.”
But Karen Cheng (鄭婉坤) does not spend money on children, nor does she in vest in gold. Cheng and her husband, Ho Ying-hau (侯英豪), both forty, are among the so-called DINKs: double-income-no-kids. Couples without children are unusual in Taiwan, but they are gradually becoming more common.
Cheng is an editor-in-chief at a consulting company that publishes books on financial management and produces television programs. Her annual income is about NT$600,000 (US$24,000). Ho, who earned a master's degree in the United States, is a manager of a multinational company. His income is about triple Cheng's.
With no children or parents to support, do they spend more generously on themselves? Cheng admits that she used to in her younger days. “When we were in our twenties, I wore tailored clothes and imported leather shoes,” she says. But in the early 1980s, they went to the United States to study and suddenly had to get by on a minimum amount of money. But they adjusted easily. “I enjoyed treasure hunting and finding bargains at garage sales,” Cheng says.
After two years, her attitudes toward financial management and consumption had shifted 180 degrees. “I'm no longer a big spender,” she says. “My husband has also changed. He used to be a passionate consumer. Now that he's getting older, he understands the importance of saving for retirement.” Ho drives a Ford Sierra, and his only real extravagance is playing golf. Cheng visits the United States about once a year and buys most of her clothes there, because she finds them less expensive. They seldom go out with friends, but sometimes entertain at home.
“We've developed a habit of compulsory saving,” Cheng says. Most of their extra money goes into real estate. One year after returning to Taiwan, they used Ho's parents' home to secure a bank loan and bought their first apartment. Over the years, they've also bought two homes in California, which they rent out, and are getting ready to buy another in Taipei. “We raise money for a down payment by starting a huei,” Cheng says. “Then we use the rent to pay the monthly installments and the fee for the house manager.” The only drawback to their investment strategy is that they are constantly in debt. “But,” Cheng says, “it has kept us from being wasteful.”
Kung Fung-duo (孔繁鐸),41,is sales director and co-owner of World Geographic, a monthly magazine covering international social and cultural issues. Starting in the publishing industry after graduating from college with a degree in Chinese language and literature, Kung began as a reporter, then switched to the business side. He makes just over NT$50,000 (US$2,000) a month, which he is free to use as he wishes because he is single.
But Kung lives a moderate lifestyle. He usually wears an Oxford shirt and jeans, and carries a plain canvas bag instead of an attache case. He wears no jewelry, not even a watch. His most precious personal item is his glasses; three years ago, he bought the frames for NT$5,000 (US$200). He has ridden a motorcycle to work since 1988, the year he sold his Buick Regal because he could never find a place to park. He owns an apartment in the suburbs, but only be cause a friend “forced” him into buying it. “I'm a passive consumer,” Kung says. “I don't have strong materialistic desires.”
He spends about NT$25,000 (US$1,000) a month on basic living expenses. Several times a month, Kung joins friends for a meal at a gourmet restaurant, followed by a visit to a teahouse. “We don't visit the most expensive restaurants in town,” he says. “Sometimes, it's a not-so-classy restaurant with one particularly good dish.” Most members of Kung's gourmet group are singles who eat out almost every meal.
Kung sometimes puts his extra cash into a huei, but only when his friends or colleagues talk him into it. He also keeps some in the bank and doesn't seem to care how much he has accumulated. “All I ask is that I won't be short of money,” he says. “Increasing my bank account doesn't make me happy.” Most of his savings go into the company he co-owns. Says Kung, “Investing in what you know and what you are really interested in is the best investment strategy.”■